4 Financial Accounting and Reporting

The correction of record of a transaction which either has not been recorded or has been recorded in incomplete or wrong way is called:

• Adjustments

• Closing of Accounts

• Trial Balance

• Balance Sheet

If the balance of the prepaid supplies account on January 1 was ₱500, supplies purchased during the year were ₱1,750 (initially recorded as asset), and the supplies on hand at December 31 (per physical count) were ₱300, the amount for the appropriate adjusting entry at December 31 is

• ₱200.

• ₱1,550.

• ₱1,950.

• ₱300.

Adjusting entries are made:

• At the beginning of the year

• At the end of the year

• During the year

• All of these

The prepaid insurance account has a debit balance of ₱3,600 at the end of the year. If unexpired insurance at the end of the year is ₱2,800, the amount of insurance expense that should be reported on the income statement is

• ₱800.

• ₱2,800.

• ₱6,400.

• ₱1,200.

The balance in the prepaid rent account before adjustment at the end of the year is ₱12,000, which represents three month’s rent paid on December 1. The adjusting entry required on December 31 is:

• debit Prepaid Rent, ₱4,000; credit Rent Expense, ₱4,000

• debit Rent Expense, ₱4,000; credit Prepaid Rent, ₱4,000

• debit Prepaid Rent, ₱8,000; credit Rent Expense, ₱8,000

• debit Rent Expense, ₱8,000; credit Prepaid Rent, ₱8,000

The profit reported on the income statement is ₱50,000. However, adjusting entries have not been made at the end of the period for supplies expense of ₱500 and accrued salaries of ₱1,300. Profit, as corrected, is:

• ₱48,200

• ₱48,700

• ₱50,500

• ₱51,800

Income that has been earned but not yet collected.

• accrued income

• prepaid income

• unearned income

• all of these

On July 1 the Fisher Shoe Store paid ₱24,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is:

• debit Rent Expense, ₱24,000; credit Prepaid Rent, ₱4,000.

• debit Prepaid Rent, ₱4,000; credit Rent Expense, ₱4,000.

• debit Rent Expense, ₱4,000; credit Prepaid Rent, ₱4,000.

• debit Rent Expense, ₱24,000; credit Prepaid Rent, ₱20,000.

The Harris Company purchased equipment for ₱15,000 on December 1. It is estimated that annual depreciation on the computer will be ₱3,000. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

• debit Depreciation Expense, ₱3,000; credit Accumulated Depreciation, ₱3,000.

• debit Depreciation Expense, ₱250; credit Accumulated Depreciation, ₱250.

• debit Depreciation Expense, ₱12,000; credit Accumulated Depreciation, ₱12,000.

• debit Equipment, ₱15,000; credit Accumulated Depreciation, ₱15,000.

If the balance of the prepaid supplies account on January 1 is ₱2,500, supplies purchased during the year were ₱10,000 (debited to an asset account), and the supplies on hand at December 31 were ₱1,800, the amount for the appropriate adjusting entry at December 31 is

• ₱10,700 debit to prepaid supplies

• ₱1,800 credit to supplies expense

• ₱1,800 debit to prepaid supplies

• ₱10,700 debit to supplies expense